DOs and DON’Ts in negotiations with venture capital investors

Start-ups and companies in the growth phase are dependent on financing from external capital providers. Due to the special risk profile, such financing will regularly be structured as equity - or by means of equity-like financing instruments. Despite fundamentally differing interests, the lender and the borrower should have the common goal of being reliable "partners" and of jointly leading the company to success with concurrent interests. In practice, however, it can often be observed that even in the early stages of the financing relationship, the success of the company and a prosperous cooperation are often unnecessarily jeopardized by inappropriate legal and commercial arrangements and requirements.

At first glance, the interests of investors - whether business angels, family offices or VC funds - and financing recipients (founders/entrepreneurs) are different. In order to establish a synchronization of diverging interests, extensive contractual arrangements are typically made - the most obviously important aspect for establishing a common denominator is the investor's participation in the financial success of the financed company.